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A Traders Look At Mogo

Talking about a company’s operations and how great their business is or how happy their customers are is all fine and dandy but there is really only one thing that makes a stock move; people buying it.

Everything that goes into the decision to buy or sell a stock can be boiled down to 2 categories; Technical or Fundamental. Let’s take a look at one of the stocks we’ve covered previously to get a better idea of how these two categories impact buys in the market.

The Technicals

Weekly

MOGO (MOGO.Q) is a company we’ve covered before but let’s take a look at the chart to see if we can gain some insight about how the stock might perform heading into the end of 2018;

Below is a weekly chart of the last 3 years of price. After 2 false breakouts of the $3.30 resistance level, price moved bearishly until October 2016 where it to rise, breaking resistance at $3.30 and making new 12 month highs at $5.00.

 

Price then pulled back to retest resistance as new support and exploded to the upside following a path which looked a lot like Bitcoin. We’ll explain why later.

Following a surge in price during late 2017, price pulled back significantly and found a floor at the previously respected level of $3.30 before retesting the mid 2017 high of $5.00.

Since retesting $5.00 price has fallen back into a range and is now at the bottom of that range coinciding with a 2 year upward sloping trend line, forming a double bottom. The shorter term trendline connecting the highs forms the other side of a triangle pattern which price is about to breakout from.

One important thing to note is the Stoch RSI which price has been following closely – The last 3 times the Stoch RSI has crossed 10.00 to the upside, price has rallied at least 50%;

 

Daily

On the Daily Chart, we can see that price has failed to break the $3.30 level 4 times this year, with the exception of 2 false breakouts in May, outlined on the chart below in Blue.

This shows us that buyers are watching this level closely and it is providing solid support for price which is a big factor to consider moving towards the inevitable breakout of the triangle pattern.

 

4 Hour

Dropping down to the intradays, on the 4 Hour chart we can see a textbook perfect break and retest of the channel which has contained price since the beginning of September.

 

Negative Criteria

The major piece of negative information on these charts is the Head and Shoulders pattern clearly visible on the Weekly Chart.

Although the pattern does have some relevance, price bounced off the neckline rather than pushing through.

 

The Fundamentals

Now let’s explain the Bitcoin similarities we mentioned earlier. In October 2017, Mogo added cryptocurrencies to their platform and it wasn’t long before the market started to associate the Mogo brand with Bitcoin. While this had the negative impact of causing Mogo’s stock price to fall in correlation with Bitcoin’s, we believe this shows more strength to Mogo’s overall business through their recognition of a new market trend and fast agile movement into this space providing their 700,000 users with a new financial product to engage with. This move shows that Mogo is more than a forward looking fin-tech company; they’re a company which takes action.

While we’ve covered Mogo’s fundamentals before, it is worth mentioning again some of the numbers which clearly show it’s undervaluation relative to other fin-tech companies.

 

The table below shows the valuation multiple and revenue growth next to some of Mogo’s Fin-tech peers.

The average multiple of this selection of peers is 9.34x EV / Revenue, with the overall industry average being even higher, companies like Adyen (NASDAQ:ADYYF) trading at over 44x multiple! We’re certainly not suggesting that Mogo trades for over 40 times EV / Revenue but getting closer to the mean certainly isn’t unlikely.

 

One thing that Mogo has in its corner is a tight share structure. With just shy of 23 million shares outstanding, it won’t take much activity for Mogo to start moving with some momentum.

Another interesting piece of information to look at is the flight of capital and interest from large investment management companies into mobile fin-tech platforms. Earlier this year BlackRock (NYSE:BLK) made a $50 Millions investment into Acorns, a micro-investing app. Canadians are behind the global trend meaning that companies like Mogo which have scale and provide users with a great experience have tremendous upside as adoption increases.

 

Summary

Positives:

  • Upward Sloping Trendline
  • Key Support at $3.30
  • Double Bottom
  • Weekly RSI heavily oversold
  • Channel Break & Retest
  • Intraday Trend Change
  • Undervalued Multiple relative to peers
  • Consistent Revenue Growth
  • Tight Share Structure

 

Negative:

  • Weekly Head & Shoulders Pattern
  • Market thinks Mogo is Bitcoin

It’s clear that the path of least resistance is to the upside and price is poised to breakout upon the next catalyst which could come at any time. Whether technical in the form of a trendline break or fundamental in the form of news, Mogo is likely to see a large spike in the near future.

 

Disclaimer: Mogo is a paid client of High Energy Trading, click here to read full disclosure.

High Energy Trading is not a licensed broker-dealer, market maker, investment advisor, or underwriter. All information that we provide is for informational purposes only and should not be construed as an offer or solicitation of an offer to buy or sell securities.

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